A struggling economy doesn’t necessarily mean makeup products will be left on the store shelf, but those shopping for cosmetics are increasingly looking for more affordable and organic brands.
According to market research firm Euromonitor International, although consumers are cutting back on non-essential goods, beauty and personal care products continue to register good growth, despite the challenges in the market.
“On the demand side, a strong personal grooming trend where greater importance was attached to physical appearance and hygiene led to changing purchasing patterns,” says Euromonitor.
Looking pretty is serious business. The Department of Trade and Industry tells Moneyweb that last year cosmetics contributed 0.1% to gross domestic product (GDP), with imports at R18 billion, exports at R13 billion, and 60 000 jobs created in the 12-month period.
Euromonitor says private label and economy brands performed well towards the end of the review period (its report was published in June 2019) as their affordability appeals to price-sensitive consumers.
“South Africans are increasingly engaging in brand switching behaviour as they look for products that offer quality at competitive prices,” according to the report. “While there is a general preference for heritage brands, a change in perception towards private label has led to a surge in demand, especially in categories where the quality is on par with the former.”
The South African consumer will, however, not compromise on quality.
“Mid- to high-income consumers are willing to spend extra on products that offer exceptionally good quality, and which stand true to their claims. This is the case for products that consumers use daily, such as skincare.”
The research firm believes that health and beauty specialist retailers such as Clicks and Dis-Chem responded to this by offering aggressive price promotions, introducing value formats and widening their portfolios of budget-friendly brands.
“The rising popularity of private label and travel-sized pack types further contributed to maintaining growth momentum for some beauty and personal care categories,” it says.
E-commerce playing a major role
Euromonitor goes on to say that retailers offering e-commerce services has led to pricing transparency for consumers, and hence the increase in sales.
“[Previously] there were some price differences among various retailers, but now all prices are uniform across the distribution channels. The only difference in price comes from special promotions that might be on offer or when delivery charges are added.”
A study conducted by World Wide Worx – Online Retail in South Africa 2019 – says online sales still make up less than 2% of total retail sales.
Just One Lap financial analyst Simon Brown says new product development, launches, and a strong personal grooming trend are expected to support continued growth in beauty and personal care.
South Africans are becoming more conscious of their heritage, he says. “That is why we are seeing, for example, more soaps [coming] from the Kalahari. They give us that warm fuzzy feeling that this is our culture, our heritage, and our country.”
He adds that retailers are also actively seeking locally manufactured cosmetic brands because of this, and because these products are likely to be cheaper than international cosmetics (not least of all because the transportation costs should be less, even though their all-round input costs might be higher because of the lower volumes produced).
Brown encourages start-up cosmetics brands to have an online strategy, while having a store of their own and also making use of established third-party retailers, to increase their profits.
Entrepreneur Sonto Pooe of NativeChild, a plant-based skin and hair care brand, faced challenges with large retailers not wanting to give her products retail space.
“Getting into retail is difficult,” she says. “Some retailers are more open to new smaller brands than others. Sometimes you find that international brands get into stores that you have been trying to get into for a long time [sooner than you].”
While its products are now available from Takealot, King-online, Game, Jet and Crafters Warehouse (they are also exported), NativeChild’s hurdle at the beginning was that shelf space at some retailers is expensive and comes with many requirements.
“It is expensive to be on shelf because some [retailers] require you to buy advertising in their catalogues, which ends up being very costly for a small business,” says Pooe.
Afri-Berry, another naturally-based skin and hair care product line, faced similar challenges.
When co-founder Relebohile Moeng entered the retail market two years after establishing Afri-Berry, South African retailers were hungry for locally produced cosmetic products, but she was unsure of the requirements needed.
Moeng finally received assistance from Pick n Pay. She was given mentorship, guidance and the business development support the business needed, unlike other retailers that simply rejected the brand. She has high praise for Pick n Pay’s Small Supplier’s Toolkit.
“Everything in the cosmetics industry and the retail market was new to us,” says Moeng. “We didn’t even have a barcode, but we were up for the challenge.”
“Other retailers just rejected us without telling us what we were doing wrong,” she adds.
Moeng has now extended Afri-Berry’s distribution to Edgars in Namibia, Swaziland and Botswana, and is preparing to distribute through Shoprite too. The company now has 28 employees and an annual turnover of R20 million.